Shale Series Part 3 - 2019/2020 production forecasts

OilPrice.com has an interesting article up that highlights comments from Schlumberger's CEO Paal Kibsgaard.

Here are some quotes:

Kibsgaard said that spending from the shale industry could be flat or down this year relative to 2018.

Companies working through DUCs (drilled but uncompleted wells) could keep production aloft even as drilling slows, but output would likely fall relative to 2018, while decelerating further in 2020.

From a conference call with analysts: “It is also worth noting that with the continued growth in U.S. shale production, an increasing percentage of the new wells drilled are being consumed to offset the steep decline from the existing production base,” Kibsgaard told shareholders and analysts on Schlumberger’s earnings call. “The third party analysis shows that in 2018, this number was 54% of total CapEx and is expected to increase to 75% in 2021, clearly demonstrating the unavoidable treadmill effect of shale oil production.”



It is interesting that when the IEA and other groups are saying that we need to start increasing investments in oil, Schlumberger's CEO believes that at least for shale, 2019 will be a flat year for spending.

In Part 2 of this series, I mention that Continental Resources chief executive Harold Hamm believes shale growth at the start of 2019 could be 50% less than 2018. Schlumberger is taking an even more conservative approach by saying there may actually be an output decline.

The conference call quote is important as it indicates how much is spent just to keep production flat.

The OilPrice article ends by saying that IEA sees US oil production slowing to just a 0.8 mb/d increase by end of 2019.

I wrote this in Part 2 using Harold Hamm's growth forecast and applying it to the full year. It seems aligned with what IEA is forecasting.

Regarding shale growth: Energy Information Administration (EIA) mentioned that US shale was estimated to hit close to 8 mb/d in December 2018 and was at 6.3 mb/d in Dec 2017. A 50% decrease in the growth would indicate we'd end up at around 8.9 mb/d in Dec 2019 (assuming his 50% decrease carries throughout the year).